Borrowing Capacity
- Dennis Daggett (Deactivated)
A theoretical measure of the total amount of debt capital that would be made available to a business by a prudent lender who: (a) has access to complete and accurate financial information, with necessary disclosures, about that business, and (b) is knowledgeable of the external economic environment in which that business operates. Character, repayment capacity, liquidity, solvency, financial efficiency, credit management, and collateral are all factors considered in determining borrowing capacity. Various financial institutions, vendors, and others may reach different conclusions as to the borrowing capacity of the same business because of their own risk bearing ability, their interpretation of the financial information made available to them, and their perception of the likely future changes in the external economic environment. See also repayment capacity. (II-10)
Authorization Path: 2.2.5.2.43.1